A recent tax case decided at the Supreme Court held that a fixed share equity member of an LLP was a 'worker' within the meaning of Employment Rights Act 1996 s.230(3)(b) and, as such, they were entitled to claim the protection of its whistle-blowing provisions.

The court held that this does not conflict with the Limited Liability Partnerships Act 2000 s.4(4).

Following the decision, it is possible that members of LLPs, in particular where the LLP provides professional services, may be able to benefit from a whole range of rights normally given to employees including paid annual leave, working time limits, pension autoenrolment, protection against whistleblowing and not being treated unfavourably due to part-time status.

As yet, it is not certain if the case applies to traditional partnerships that are not LLPs. LLPs, and indeed other partnerships, may wish to take this decision into account when taking on new members and certainly review the position for existing members. Indeed they may have to take action now to establish the rights their members hold. For example:

  • LLPs may need to review their LLP agreement and members' rights under that agreement to ensure compliance with statutory rights; and
  • For pensions auto-enrolment, LLP members may have taken out lifetime allowance protection which precludes further investment in a pension scheme. If they are now enrolled in a pension scheme they may need to opt out as soon as they are enrolled to avoid loss of protection.

The above list is clearly not exhaustive.

www.supremecourt.uk/decided-cases/docs/ UKSC_2012_0229_Judgment.pdf

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. NTD191 30/09/2014.